Rule 7B(1A) deals with Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavoring ingredients. In this case, 60% of income of assessee from such business will be treated as agricultural income and is exempt and balance 40% of income is treated as non-agricultural income and will taxable as “Profits and gain from Business or Profession”.
Rule 7B(1) deals with only income derived from the sale of coffee grown and cured by the seller in India and it shall be computed as if it were income derived from business, and twenty-five per cent of such income shall be deemed to be income liable to tax and shall be included in “profits and Gains from Business or Profession”.
Rule 7B- Growing and manufacturing of Coffee in India
Any income derived by a person from selling coffee in India manufactured from self-grown coffee in India shall also be composite income comprising of agricultural income and non-agricultural income.
In such a case also, first of all total income/ composite income shall be calculated as follows:
| Total income/ Composite income = | Sale proceed of coffee (industrial product) Less: Cost of Cultivation (agricultural expenses) Less: Industrial Expenses |
Now,
Case 1: if coffee is grown and cured by seller- Rule 7B(1)
Agricultural income = 75% of composite income
and Non-agricultural income = 25% of composite income
Thus, 25% of total income of such coffee industries will be chargeable to tax under the head ‘Profit and gain from business and profession’.
Case 2: If coffee is grown, cured, roasted and grinded by the seller with or without mixing chicory or other flavoring ingredients- Rule 7B(1A)
Agricultural income = 60% of composite income
and Non-agricultural income = 40% of composite income
Thus, 25% or 40% as the case may be of total income of such coffee industries will be chargeable to tax under the head ‘Profit and gain from business and profession’.
While computing such income i.e. the income referred to in sub-rules (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned. For the purpose determining such cost, no deduction shall be made in respect of the amount of any subsidy which is exempt from tax u/s 10(31).
Reference:
As Per Rule 7B(1A), of the Income Tax Act, 1961-
Income from the manufacture of coffee.
7B(1A). Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavoring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.
Explanation : For the purposes of sub-rules (1) and (1A) “curing” shall have the same meaning as assigned to it in clause (d) of S. 3 of the Coffee Act, 1942 (7 of 1942).
(2) In computing the incomes referred to in sub-rules (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income.